question archive State true or false and justify your answer: If market demand increases and market supply decreases, then the change in equilibrium price is unpredictable without first knowing the exact magnitudes of the demand and supply changes
Subject:MarketingPrice:2.88 Bought3
State true or false and justify your answer:
If market demand increases and market supply decreases, then the change in equilibrium price is unpredictable without first knowing the exact magnitudes of the demand and supply changes.
Ans: False
Workings:
Equilibrium occurs at the point where the demand curve intersects the supply curve. When market demand increases, the demand curve shifts to the right. And when market supply decreases, the supply curve shifts to the left. The effect of increase in demand and decrease in supply will lead to increase in equilibrium price, but the equilibrium quantity is unpredictable without first knowing the exact magnitudes of the demand and supply changes.
Thus, the given statement is false.